The IMF, in a report released three days ago, supported claims by the IMF director-general Michael Camdessus that Southeast Asian nations, mentioning Thailand, Malaysia and Indonesia, were warned a year before the Thai baht crisis erupted in July.
The alarm was raised during regular consultations on the countries’ economies, and the annual report, which came just before the IMF and World Bank annual meetings in Hong Kong, also gave IMF’s version of the cause of the Asian currency crisis.
The report set out the scenario for the crisis:
Confidence was undermined by the sudden realisation of the extent of trade and financial imbalances after 10 years of substantial growth. A liquidity crisis was caused by the brutal withdrawal of ‘floating’ capital. This scuttled the banking sector weighted down by massive speculative investment in property.
The IMF report said that in August 1996, it foresaw Malaysia’s problems.
It said the IMF directors held the view that the size of the deficit and the increased reliance on debt-creating flows in Malaysia gave rise to risks and that the authorities should "take early action to attenuate overheating and to place the deficit on a clear downward path."
Anwar should address the issue raised by the IMF report that the Malaysian government had been warned last August about the vulnerability of the Malaysian economy to a crisis, and why the government had dismissed the warning so as to avert the twin currency and stockmarket crisis.